Wong Chiu Pui v. Wong Kit Wah

HCA 2003/2018

[2022] HKCFI 1645

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2003 OF 2018

________________________

________________________

Before:  Mr Recorder Maurellet, SC, in Chambers

Date of Hearing:  31 May 2022

Date of Judgment:  31 May 2022

________________

J U D G M E N T

________________

1.On 15^th November 2021, Master K W Wong dismissed the application of the Plaintiff (who I will refer to as the “Mother” in this judgment) by way of summons, for leave to amend her statement of claim (“SOC”), together with costs.

2.On 24^th November 2021, the Mother filed a notice of appeal to a Judge in Chambers. This is the hearing before me today.

3.As a result of my suggestion at the outset of the present hearing to stay the present High Court proceedings, the parties respective counsel took instructions and agreed to do so, and as a result the appeal from the Master became somewhat academic. Having said, that the background leading to the present hearing is relevant to my decision on costs and I believe that the present factual scenario leading to possible parallel proceedings is becoming more and more common and hence the approach to case managing such disputes may be of relevance to other parties in a similar situation.

4.The Mother is the mother of the second defendant by counterclaim, who I will refer to as the “Son” in this judgment. The Son was married to the defendant (by original action) who I will refer to as the Wife in this judgment.

The Mother’s SOC as currently pleaded

5.As currently pleaded, the Mother seeks a declaration that she holds a property located in residence Bel-Air in Pokfulam which had been bought for about HK$20 million in the fourth quarter of 2014 (the “Flat”).

6.The Mother further claims that she had agreed to have the purchase made in the name of the Wife upon the Wife’s representation that given the Mother’s age and lack of income, it would be more convenient for the Wife to arrange for a mortgage.

7.It is then pleaded that it was expressly agreed between the Mother and the Wife that the Mother was the sole beneficial owner of the Flat, and that the Wife acknowledged the same in writing, before she was allowed to sign the preliminary sale and purchase agreement in her name.

8.The Mother further says that in the letter dated 3^rd May 2018, the Wife through her former solicitors wrongfully claimed to be the beneficial owner of the Flat and demanded that the Mother deliver vacant possession of the same to the Wife. This statement of claim was filed on 11^th March 2019.

Defence and counterclaim of the Wife

9.The Wife pleads that she purchased the Flat as the sole and beneficial owner, and by reason of the same she counterclaims that she holds the Flat as its true and sole legal beneficial owner since its purchase, and asks for an order that the Mother and the Son deliver vacant possession of the Flat to her.

10.At paragraph 28 of her pleading she pleads that “alternatively , if it is the case, which is denied, that [the Wife] is not the sole beneficial owner of the [Flat] , and/or the amount of money provided by the [Mother] was not a loan but contribution for beneficial interest , and / or [the Mother] had acquired some beneficial ownership in the [Flat] by any other means, The [Wife] and / or the Son also have beneficial interest in the [Flat] due to the monetary contributions aforesaid by way of resulting trust”.

The proposed amendments to the SOC

11.I will now briefly explain what the proposed amendments (for which leave was refused by the learned Master) consists of.

12.Whereas the focus of the SOC was on the issue of ownership of the Flat, the proposed amendments deal with the question of beneficial ownership of two other real properties which are referred to in the pleadings as the Commercial Property and the Carpark.

13.The Mother claims that she was at all material times. until the sale of the Commercial Property on 21^st August 2018 the beneficial owner of it. That Commercial Property had been purchased by her on 11^th March 2011, however she says the legal title had been conveyed at her direction, to both herself and her Son has joint tenants.

14.For reasons which I need not get into, her case is that she held 100% of the beneficial ownership of the Commercial Property and that her Son held 50% of the legal title on trust for her.

15.When the Commercial Property was sold in August 2018, half of the net proceeds had to be stake-held with the solicitors acting for the vendors and would not be released until further Court Order.

16.In short, this was because the Wife had made an application in the Family Court to restrain the release of half of those proceeds.

17.The other matter which the amendment seeks to tackle concerns the Car Park of which the Mother says that she was the beneficial owner until its sale in December 2017 for HK$2.5 million.

18.The Mother’s case is that at her direction, the legal title of the Car Park was held by her Son on trust for her “for convenience”. She further says that her Son agrees that she has been and is the 100% beneficial owner.

19.The Wife applied under the Family Court proceedings for an Order that the Mother be joined as a party for the purpose of the Wife's application under section 17 of the Matrimonial Proceedings and Property Ordinance (Cap. 192) to set aside the Son’s alleged disposition of HK$2 million, being part of the proceeds of sale of the Car Park to the Mother. The Mothers’ case is simply that she was entitled to the proceeds of sale being beneficial owner of the Carpark, and there can thus be no disposition under section 17 of the MPPO.

Master’s decision and other procedural steps

20.On 7^th July 2021, His Honour Judge Simon Lo, upon the Mother’s undertaking to the Family Court to take out an application to amend the statement of claim in the present High Court proceedings within three days, fixed an FDR hearing with one day reserved for March 2022.

21.His Honour further ordered pursuant to paragraph 4 of his Order that if the Mother’s application for amendment in the High Court proceedings were to be unsuccessful, that she should inform the Family Court as soon as possible and directions by way of paper disposal would be given.

22.On Christmas Eve of 2021, HH Judge Simon Lo made the following order on papers “regarding the preliminary issues over the beneficial interest of the commercial property and the car park...the [Mother] is to file and serve points of claim within 28 days…the [Wife] and the [Son] are to file their respective points of defence and counterclaim (if any) 14 days thereafter; and the Mother is then to file her points of reply and defence to counterclaim (if any) within 14 days thereafter”. There is then to be an exchange of a list of documents.

23.The FDR hearing which had been fixed for March 2022 would be vacated and adjourned to a date to be fixed after 31^st May 2022 or “pending the outcome of the [Mother’s] appeal against Master K W Wong’s Order whichever is later”. This is the appeal which is before me today.

24.On 20^th January 2022, the Mother filed her points of claim. On 18^th February 2022, the Wife filed her point of defence and counterclaim. On 4^th April 2022, the Mother filed her points of reply and defence to counterclaim.

25.After the application to amend before Master K W Wong had been dismissed, the solicitors for the Mother had written to the other parties explaining that since they had appealed against the Master’s order it was premature to proceed with pleadings and evidence in the Family Court proceedings.

26.Indeed, on 21^st December 2021, the solicitors for the Mother had written to the clerk of HH Judge Simon Lo explaining that since they had appealed the Master’s order and it was to be heard on 31^st May 2022, “the matter should await the outcome of our appeal against Master K W Wong’s decision on 15th of November 2021. Hence it is premature to proceed with pleadings and evidence in this matters we therefore propose the following directions…. 1. the summons of the [Wife] dated 12^th October 2021 and the summons of the [Mother] dated 27 April 2021 be stayed pending outcome of the [Mother’s] appeal against Master K W Wong’s decision in HCA 2003/2018 made on 15^th November 2021”.

27.No stay was ordered. The pleadings concerning the issue regarding the beneficial ownership of the Commercial Property and the Carpark have been closed in the Family Court.

The mooted possible transfer to the High Court of the Family Court proceedings

28.In the submissions here and below, it has been suggested that one of the possible benefits of having the question of the Carpark and Commercial Property’s beneficial ownership being determined in the High Court was that it would be desirable to have all the matters concerning these three protagonists being determined at one place before one court. The High Court is, it is argued, the more appropriate place to determine all the disputes since the Family Court could not order declarations for the reasons set out below.

29.If the issue of the Carpark and the Commercial Property were to be determined together with the question of the ownership of the Flat in the High Court it is thus said that it would also make sense to transfer the Family Court proceedings to the High Court.

30.What is immediately apparent is that although this is something which had been referred to from time to time, for whatever reason, no such application has been formally made.

31.The applicable principles concerning transfer of proceedings from the Family Court to the High Court have been recently summarised in the decision of Deputy District Judge Susan Wong in TYT and TLH (unreported decision dated 10^th March 2020).

32.The Judge there explains that there is no dispute that the Family Court has an unfettered discretion to order transfer of proceedings and that when it is exercising that discretion, the Family Court is guided by rules 32 and 80 of the Matrimonial Causes Rules as well as Practice Direction 15.4.

33.The Judge then (with respect) rightly notes that the Family Court still needs to be satisfied that the transfer is justified even in the case where all the parties agree.

34.The Judge then identified a number of relevant considerations including:

(1)  Whether there is a matter of public interest;

(2)  Where there are novel or difficult points of law to be resolved;

(3)  Where delay will work a clear injustice;

(4)  Where there is unduly complicated or conflicting evidence the resolution of which is likely to be so protracted that it will unduly prejudice the Family Court lists and this work against the interests of other litigants;

(5)  Whether the financial limits for the time being relating to the jurisdiction of the District Court in other matters (but this factor alone is not decisive);

(6)  In general, whether there is special complexity.

35.There has been no application taken out so far, and this suffices to deal with this point in so far as it is being put forward as a factor which should be considered as a matter of case management when considering the amendment application.

36.Since an application for transfer might conceivably be taken out, it would in my view be inappropriate and undesirable for me to say too much about it.

37.To the extent it would be necessary to form a view on it, and in so far as it is being suggested that this is something which should weigh in favour of allowing the amendments, I would simply say that on the materials before me, it is certainly not obvious that the Family Court proceedings cry out as an obvious candidate for transfer to the High Court either by reason of complexity or the amount at stake (which although not modest, does not appear by Hong Kong standards to fall into the ‘big money’ category) or by reason any of the other factors as set out above.

Principles relating to amendments and underlying objectives of the Rules of the High Court

38.The Mother’s main point appeared to be that since the amendments touch upon the ownership of the Carpark and the Commercial Property are not demurrable, the usual principles pertaining to amendments of pleadings should apply and therefore there can be no question but that she should be entitled to amend her pleading so as to include those issues. In any event as the High Court proceedings are ongoing, these would need to be determined in the High Court, and therefore it may well be that the Family Court proceedings could be transferred up so that everything could be conveniently heard and tried in one place before the same Court, i.e. the High Court.

39.I accept the submissions of Mr Chain that the facts of the present case does not fall within the precise four corners of those as described by the Court of Appeal in LLC v LMWA [2019] 2 HKLRD 529, where more often than not, it is the ‘rich’ spouse’s parent who claims that a property in his or her offspring’s name actually belongs to that parent, whereas in the present case the asset claimed by the parent Mother is in the name of the spouse of her Son i.e. the Wife.

40.The dispute concerning those two properties were already ‘live’ issues and identified by the Family Court at the time of the hearing before the Master although there were no pleadings then.

41.Since then, and by the time of this hearing, the pleadings have closed.

42.I consider that when the Court considers whether to allow to amend the Mother’s SOC, it should take into consideration the underlying objectives of the civil justice reform.

43.I will cite the applicable objectives and how the Court deals with them here (with my emphasis):

“Underlying objectives (O. 1A, r. 1)

The underlying objectives of these rules are –

(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

(d) to ensure fairness between the parties;

(e) to facilitate the settlement of disputes; and

(f) to ensure that the resources of the Court are distributed fairly.

Application by the Court of underlying objectives (O. 1A, r. 2)

(1)  The Court shall seek to give effect to the underlying objectives of these rules when it—

(a)  exercises any of its powers (whether under its inherent jurisdiction or given to it by these rules or otherwise); or

(b)  interprets any of these rules or a practice direction.

(2)  In giving effect to the underlying objectives of these rules, the Court shall always recognize that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.

Order 1B

Case Management Powers

Court’s general powers of management (O. 1B, r.1)

(1)  The list of powers in this rule is in addition to and not in substitution for any powers given to the Court by any other rule or practice direction or by any other enactment or any powers it may otherwise have.

(2)  Except where these rules provide otherwise, the Court may by order—

(a)  extend or shorten the time for compliance with any rule, court order or practice direction (even if an application for extension is made after the time for compliance has expired);

(b)  adjourn or bring forward a hearing;

(c)  require a party or a party’s legal representative to attend the Court;

(d)  direct that part of any proceedings (such as a counterclaim) be dealt with as separate proceedings;

(e)  stay the whole or part of any proceedings or judgment either generally or until a specified date or event;

(f)  consolidate proceedings;

(g)  try two or more claims on the same occasion;

(h)  direct a separate trial of any issue;

(i)  decide the order in which issues are to be tried;

(j)  exclude an issue from consideration;

(k)  dismiss or give judgment on a claim after a decision on a preliminary issue;

(l)  take any other step or make any other order for the purpose of managing the case and furthering the underlying objectives set out in Order 1A.”

44.If I were to allow the amendments, there would be pleadings and issues to be resolved concurrently in two Courts, namely the High Court and the Family Court.

45.This seems to me to be wrong both as a matter of principle but also as a matter of practice and case management.

46.This consistent with the concerns expressed as early as 2012 by Jeremy Poon J (as the CJHC then was) and as relayed in Bar Circular 030/12. The aim (which is entirely consistent with the underlying objectives) is to avoid parallel proceedings with duplication of costs, time and possibly even inconsistent decisions:

“Family related proceedings in the High Court

The Family Law Special Committee wishes to draw members’ attention to the concerns expressed by Mr. Justice Poon who is in charge of the Civil List and the Family Law List of the High Court as follows:

1. Parties who are involved in matrimonial proceedings in the Family Court for matters which arose from or are closely connected with the extant disputes in the High Court have (most regrettably) failed to inform the Court of the existence of concurrent proceedings.

2. Parallel proceedings in the High Court and the Family Court on the same or substantially the same subject matters or disputes with close connection should be avoided as far as practicable Legal advisers handling such proceedings all have a positive duty to assist the Court in this regard.

3. They should properly advise their clients as to the undesirability of commencing parallel and concurrent proceedings in both Civil List and Family Law List of the High Court.

4. Where such proceedings are to be or have been commenced, parties’ legal representatives should immediately inform the Courts of the same in full and seek appropriate directions from the Court.

5. Any failure to do so may attract adverse costs orders against not only their clients but also the legal advisers.”

47.Consistent with these principles, I therefore invited the parties to consider staying the present proceedings so that the issue of ownership of the Flat to be determined in the Family Court. Since all the parties will be before it (and therefore are bound by it), this will avoid the existence of parallel proceedings and possibly an application for transfer of the Family Court proceedings to the High Court, which might otherwise have been made.

48.Even if the Family Court might not be able to formally grant declaratory relief regarding ownership or transfer of the Flat by reason of its rateable value, if the issue is substantively dealt with there while the present proceedings are stayed, findings which are made will therefore binding on all the parties and later on, the stay might then be lifted so that the High Court could grant formal declarations. It is unlikely that there would be any complications.

49.A stay can be granted either by reason of the Court’s inherent jurisdiction or more appropriately in the present case pursuant to its statutory powers under the Rules of the High Court, in particular, O.1A rule 2(e).

50.A loose analogy could be drawn with winding up of companies where there is a shareholder agreement with an arbitration clause. Whereas an arbitral tribunal does not have the statutory power to order to wind up companies (as such jurisdiction is solely vested in the Court) upon a petition being filed, the Court can stay the petition pending the conclusion of the arbitral proceedings upon which the Court may lift the stay and consider whether to grant a winding up order based on the findings of fact which have been made: see Re China Europe International Business School v Chenwei Evergreen Capital (unrep. Judgment of Linda Chan J. dated 22/11/2021) and Re Quicksilver Glorious Sun [2014] 4 HKLRD 759 at paragraph 23 where Harris J held that.

“23. In the present case the dispute between the parties concerns the basis upon which the joint venture is to end. In broad terms Glorious Sun says that Quicksilver should sell its shares and grant a new licence in respect of the trademarks. Quicksilver say, although only recently, that Quicksilver Glorious Sun JV and Quicksilver Glorious Sun Licensing should be wound up. These issues can be determined by arbitration. If the arbitrators conclude that Quicksilver is correct an application can then be made to the Court for winding-up orders. As Petitions have already been presented this will only require that the stays of the Petitions that I have ordered be lifted. This Court will not need to rehear the substantive arguments. In my view it is both permissible for the Court to stay the winding-up Petitions pending the outcome of the arbitration. It is also practical and desirable. The arbitration is underway and it is undesirable that two sets of proceedings continue in parallel. The arbitration can address both claims and make an award, which gives the successful party what it wishes, although in the case of Quicksilver an award in its favour will require the stay to be lifted and the Court invited to make a winding-up order. The Court cannot deal with Glorious Sun’s claim.” (my emphasis)

51.It seems to me that these principles are also relevant and applicable in the present case.

Disposal

52.For those reasons it seems to me that the Master was entirely right in dismissing the application on the matter as it then stood before him, and by reason of the further developments since then and the close of pleadings in the Family Court (in the absence of a stay of the Master’s order) even better and stronger reasons now exist to refuse the amendments.

53.Had it been necessary to do so, I would have refused the application for amendment and therefore would have dismissed the appeal.

54.Having ordered a stay pending the conclusion of the Family Court proceedings pursuant to the Court’s case management powers, it is unnecessary for me to formally dismiss the appeal and I therefore make no order on it save as to costs. I will also in an abundance of caution give the parties liberty to apply. Once the proceedings are concluded in the Family Court, it will be up to the parties to decide whether they wish to lift the stay here and what precise relief to seek.

Costs here and below

55.I recognize that I would have dismissed the appeal from the Master had the application for leave to amend be sought. On the other hand, while the parties had at various stages indicated they wished for everything to be resolved before one Court, no application for a stay of the High Court proceedings had been sought (although the Wife had mooted the possibility of transferring the Family Court proceedings to the High Court).

56.I also have some sympathy for the Plaintiff as it was in a slightly odd position of having the ownership of the Flat being dealt with in the High Court, whilst the issue of ownership of the two other real properties were going to be dealt with in the Family Court.

57.All in all, in the exercise of my discretion I order that the Order as to costs before the Master is to remain undisturbed, whereas the costs of the appeal and of today will be in the cause in so far as the Mother and the Wife are concerned.

58.In so far as the Son’s costs are concerned, his costs will be reserved for now, but presumably borne by either the Mother or the Son after the conclusion of the issue of ownership of the Flat is resolved in the Family Court in which case he can apply to uplift the stay of these proceedings (should no agreement be reached).

59.For the avoidance of doubt, the Son’s costs of this appeal will be taxed in accordance with legal aid regulations.

Concluding remarks

60.As Lam Ag CJHC (as Lam NPJ then was) aptly observed in LLC (supra):

“31. Like other places in the world, the divorce rate in Hong Kong is getting higher and higher. The caseload for the Family Court is increasing every year and the cases are getting more complicated. It is not uncommon that matrimonial or family proceedings lasted much longer than they should have and the legal costs incurred by the parties drained away an unreasonably large proportion of the family wealth. Based on our experience on the bench in hearing family cases, there is an urgent need for those practising family law to embrace a more proactive mindset to resolve family disputes through effective and proportionate means. There is also a need for the courts to adopt proactive case management to curtail excesses in litigation which ultimately do not do any good in resolving the matter for the parties.”

61.Considering the size of the family ‘pot’ (which of course is to some extent uncertain at this stage given the factual disputes), it is very likely that a significant chunk of that ‘pot’ would be used up in the litigation in a way which may not be proportionate and ultimately this will not do any good to any of the parties.

62.It remains for the Court to thank the parties counsel for their assistance.

Mr Benjamin Chain, instructed by Johnny K K Leung & Co, for the plaintiff (by original action)/1^st defendant (by counterclaim)

Mr Ken S H Chan, instructed by Sun Lawyers LLP, for the defendant (by original action)/plaintiff (by counterclaim)

Ms Betty Soo, of Li, Kwok & Law (assigned by the Legal Aid Department), for the 2^nd defendant (by counterclaim)